Hospital board declines to give Hathaway a new contract

Linda SatchwellStaff Writer7/7/2010

Plumas District Hospital board president Dr. Mark Satterfield explained the background leading up to a possible vote on a new contract for Chief Executive Officer Dick Hathaway at the July 1 board meeting.

In February, the board had become aware that “a CEO agreement can last no longer than four years in a district hospital.” Hathaway’s contract had been in effect for nine years, so the board “began the process of negotiating and securing a new contract.”

Hathaway’s current contract, signed in April 2002, includes a starting salary of $134,365, increasing to $139,365 in July 2002, with possible upward adjustments taking place each January at the board’s discretion.

In addition, Hathaway receives a bonus based on 10 percent of base salary for “goals accomplished” during the previous year. The board also determines the bonus on an annual basis. This year, the board declined to give Hathaway a bonus.

He receives medical and life insurance and a retirement plan. Finally, if he is “involuntarily terminated without cause,” he receives “severance pay in a total amount equal to six months’ salary and benefits.”

Alluding to the ongoing hospital tax debacle, Satterfield said that despite “other distractions” the board had made good progress towards a new contract. In fact, board members met in closed session twice — June 10 and 18 — and had appointed board members Valerie Flanigan and Bill Elliott to negotiate with Hathaway’s attorney regarding contract details.

Over the past few weeks, some board members — because of the dismal April PDH financials, the economy in general and the volatility the hospital is experiencing on the tax issue — felt increasingly uncomfortable with approving a more expensive contract for Hathaway.

Ongoing negotiations had experienced “a couple of wrinkles toward the end here,” said Satterfield. “We’re trying to consider where to go with that.”

Flanigan, one of the two negotiators, said, “With respect to Mr. Hathaway, who deserves an updated contract, given the situation that we’re not in agreement (on the new contract), I can at least make a motion that we (update) the outdated contract ... so he’s at least not operating without a contract.”

Board member Fred Thon made a motion to table discussion on the new contract and extend the existing contract until September. He wanted to see the results of the August tax cap election before he voted on a new contract he said.

Elliott amended Thon’s motion to extend the current contract for 18 months, “to the end of 2011, but with an agreement that in January of 2011, once the elections have been settled, we all have a better sense of hospital finances — which are looking much more encouraging,” the board can revisit the issue.

In the meantime, an extension would at least provide a level of security for Hathaway, he said.

Elliott explained he felt September was too soon to make an informed decision, because he wanted to see if the dismal financials of April were an anomaly. (Chief Financial Officer John Nadone reported there had been a significant upswing in May and June.) Also, Elliott wanted to see if any of the three board members up for election — himself, Flanigan and Thon — were replaced. In that case, he felt the community deserved to have the new board members in on the CEO’s contract negotiation.

Thon disagreed with letting a new board make the decision on a new contract. Elliott said, however, that was why he wanted to see Hathaway receive the protection that extending the existing contract until December 2011 would afford.

Board member John Kimmel pointed out that the board could, in fact, chose to revisit the new contract issue at any time — “you can always install a new contract,” he said.

Elliott’s amendment went to a vote with Elliott, Flanigan, Satterfield and Kimmel voting for it, and Thon abstaining.

There was some procedural confusion surrounding the vote, but Satterfield reiterated what the board had voted for: “Bill’s amendment would be to reconsider (the new CEO contract) in January and to offer an extension of the current contract with new dates, etc., until the end of 2011.”

Flanigan said if “time and opportunity is changed with regards to finances and all,” the board should consider addressing the new contract issue again before January, “so as not to keep Mr. Hathaway waiting.”

Satterfield agreed, but said Elliott’s concern regarding the hospital’s “financial uncertainty” and the upcoming board election (which could potentially replace a majority of members) was warranted.

“I think there’s some value to acknowledging the public’s right to participate in all of this.”

Hathaway was visibly upset by the board’s action, but made no comment during the meeting, and he was unavailable for comment by press time.

After the meeting, Satterfield said there had been some question regarding “procedural process in order to secure this action,” and the board would likely make some “clarification of action taken” later.